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HARRISBURG, Pa. – Pennsylvania Department of Banking Secretary A. William Schenck III is getting tough on enforcing consumer protection legislation. Schenck, who was appointed Secretary two years ago by Gov. Ed Rendell, has set up a new Investigations Division to expand the historic role of the agency from one of just being an examiner of the books of credit unions and banks, to also include an enforcement role. Schenck’s objective, explained Pennsylvania Credit Union Association SVP Communications and Marketing Mike Wishnow, is to document predatory practices primarily with non-depository lenders such as mortgage bankers and brokers, payday lenders, consumer finance companies, check cashers, and pawn brokers. “Consumer abuse is very high on Secretary Schenck’s priority list. To a great extent that explains why he is as receptive as he is to the credit union movement. Credit unions have historically been consumer protective and Schenck recognized that early on,” said Wishnow. By year end, Schenck intends to hire 11 investigation and enforcement officers as well as intelligence analysts in Philadelphia, Pittsburgh, and Harrisburg. The Secretary said the people who are being hired to work in the new Investigations Division will have experience working in law enforcement in white collar financial crime units. John Vicinsky has already been hired as Chief of the Investigations Division and will start in his new position March 7. Schenck has also already installed the same software in the Investigations Division that’s used by Homeland Security and the CIA that gives the new division investigative capabilities such as data gathering and the ability to see behavior patterns. “If we don’t have the ability to enforce legislation, then legislation isn’t effective. We have to be able to enforce the law,” Schenck told Credit Union Times. The Secretary said his decision to form the Investigations Division “started with the determination we’ve made to do something very proactive about abusive financial practices in Pennsylvania. “We have situations where consumers daily are calling our consumer help line, we’ve met with several consumer groups and spoken with individuals whose families have been hurt by certain abusive financial transactions they’ve entered into. It’s clear there is financial abuse being perpetrated in Pennsylvania,” Schenck said. “There’s clearly been an increase in the volume of lending by non-depository institutions in Pennsylvania,” said Schenck. “We’ve had a huge volume of refinancings and consumers taking on enormous amounts of credit, as well as a substantial increase in efforts to get loans to lower income individuals. That creates an opportunity for marginal financial services players to take advantage of consumers and fosters an environment that’s ripe for abusive practices.” Schenck said the new Investigations Division, which includes a combination of examination and investigation personnel, is patterned after a similar one run by the New York Department of Banking. To become an effective enforcement agency, Schenck is taking several steps: * doubling the size of the examination unit looking at non-depository financials from 11 to 22 people. Schenck expects to further increase the number of people in this unit because of the number of non-depository institutions there are in Pennsylvania – there are currently 15,000 licensed financial institutions in Pennsylvania, up 3,000 from when Scheck was appointed to his position. “We want to be sure that once these businesses are licensed that they’re doing what they’re licensed to do.” * has already doubled the size of the licensing function to 14 people including a new manager. Included in that group are investigators “who are there to make sure the people we give licenses to should have them and are suitable to deliver the types of financial services they want to deliver.” The investigators will do criminal background checks and research applicants’ business histories. * increased the size of consumer services unit which takes phone calls from consumers from three to seven people including a new manager. * in the process of working with other states to create a database “so we don’t have someone setting up a shop in other states who has practiced abusive services here, and vice versa.” Schenck noted that “there is a different mentality between examiners and investigators,” and he said investigators will be skilled at putting together packages that can be taken to the state Attorney General or the U.S. Attorney General to prosecute violators. They’ll also put packages together that the Department of Banking will be able to use to remove violators’ licenses. Schenck said there are “severe restrictions” on the Department of Banking at this time to make public any information on a company that may be abusing consumers. But his office has been working with legislators “when there’s clear evidence” that a non-depository financial services provider has been abusing consumers, to be able to make that information available to the public either through the media or on the Department of Banking’s Web site. “The last thing we want to see is for a business to be able to continue to perpetrate abuses while a case drags out,” said the Secretary. While Schenck said the plans for the new Investigations Division have been in the works for a little more than a year, the key to getting it up and running was having the budget to do it. He got that authorization when the budget for July 1 2004-June 30, 2005 was approved. “It took awhile for the money to become a reality, but now that we have it we’re going to go to the legislature again for further expansion of the budget so we can expand the program,” said Schenck. The Secretary of Banking said he has the full support of Gov. Rendell on the Investigations Division. “This is something he wants us to do. The governor as well as the state legislature wants us to reduce abusive lending practices in the state,” he said, adding that there are “a number of cases” the Investigations Division is already looking at. -

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